Indian stock indices extended their bull run from the previous two weeks and traded marginally higher in early trade on Monday.
At 9.38 a.m., Sensex traded at 57,771.50 points, up 201.25 points or 0.35 per cent, whereas Nifty at 17,232.85 points, up 74.60 points or 0.43 per cent.
Notably, the Indian stocks recorded their best weekly performance during the week to July 22 marking its best week since February 2021, supported by renewed buying, especially in banking and IT stocks, among others.
During the past two weeks, Sensex and Nifty rose over 7 per cent on a cumulative basis.
Foreign portfolio investors becoming net buyers in Indian stock markets again after nine long months might have supported the investors' sentiment.
In July, FPIs bought equities worth Rs 4,989 crore, National Securities Depository(NSDL) data showed.
So far in 2022, they, however, sold a total of Rs 225,319 crore investments in India, of which Rs 212,369 were from the equity segment.
Tightening of monetary policy in advanced economies including rising demand for dollar-denominated commodities, and strength in the US dollar had triggered a consistent outflow of funds from Indian markets.
Investors typically prefer stable markets in times of high market uncertainty.
Further, consistent depreciation of the rupee as well as depleting Indian foreign exchange reserves too had a bearing on the weak market sentiments.
"The big positive for the Indian market is the FPIs turning buyers in July after 9 months of relentless selling. The sharp decline in the dollar index from above 109 to below 106 now indicates that the flight to the safety of the dollar is over for now," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
"After the expected run-up in financials, now, capital goods, autos particularly passenger and commercial vehicle segments and select pharmaceuticals look interesting," Vijayakumar added.